Seventh Circuit says state rule that debt collector must serve papers on debtor unless debtor’s counsel has filed an appearance triggers “express permission” exception of the FDCPA

The Seventh Circuit in Holcomb v. Freedman Anselmo Lindberg, LLC, 900 F.3d 990 (7th Cir. Aug. 21 2018) reversed a district court judgment against a debt collector alleged to have violated the FDCPA rule against sending notices to a debtor it knows is represented by counsel. The Court held that because the attorney had not filed an appearance in the state court collection action in accordance with Illinois rules, it was not an attorney of record. The rule therefore required the debt collector to serve papers on the debtor directly which the Seventh Circuit held amounted to “express permission”; an exception to the no-contact rule.

When the plaintiff ran up a credit-card bill and did not pay, the creditor hired a law firm, the debt collector, to collect it. The debt collector brought suit on the creditor’s behalf. The debtor initially appeared pro se but later retained an attorney to represent her. When the debt collector moved for default judgment, however, that attorney had not yet filed a written appearance. So it served the motion on both the debtor and her attorney in accordance with an Illinois court rule.

The debtor sued under the FDCPA alleging that the debt collector contacted the debtor directly when it knew she was represented. On cross motions for summary judgment, the debt collector argued that the Illinois court rule gave it “express permission” to serve the default motion on the debtor directly. The rule requires service of court papers on a party’s “attorney of record,” if there is one, but “[o]therwise service shall be made upon the party.” Because the debtor’s attorney had not yet filed a written appearance, the debt collector argued that he was not yet the “attorney of record” for purposes of the rule. That, in turn, required service on the debtor directly. The district judge rejected this argument as “hyper-technical” and entered judgment for the debt collector.

The Seventh Circuit reversed. The FDCPA prohibits a debt collector from communicating with a debtor about the collection of a debt when it knows the consumer is represented by counsel. But there are several exceptions, one of which is that the statute prohibits direct contact with a represented debtor “’[w]ithout … the express permission of a court of competent jurisdiction.’” “Stated positively, the FDCPA permits direct contact with a represented debtor if a court of competent jurisdiction authorizes the contact”.

It held that Illinois precedent is clear that under the Illinois court rule an attorney becomes a party’s “attorney of record” only by filing a written appearance or other pleading with the court. Since the attorney had done neither, the rule not only permitted, but required, the debt collector to serve the default motion on the debtor directly. The rule gave the debt collector “express permission” to serve the debtor directly.

The district judge had rejected this reading of Rule 11 as “hyper-technical.” He concluded that Illinois trial judges have discretion to recognize a lawyer as a party’s attorney of record in the absence of a written appearance, and indeed the state court had done so by checking the box on the call orders showing that “defendant’s counsel” was “present before the court” at the November 12 and January 6 hearings. The Court held that this approach cannot be reconciled with Illinois precedent, which adopts a bright-line rule: a lawyer can become an attorney of record within the meaning of Rule 11 only by filing a written appearance or other pleading with the court.

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